Question

The company earns a net profit of ` 24,000 with a capital of ` 1,20,000. The NRR is 10%. Under

capitalisation of super profit, goodwill will be .

(a) ` 1,20,000 (b) `70,000

(c) ` 12,000 (d) `24,000​

Answer 1

ANSWER

Calculation of goodwill under capitalisation basis:

Capital employed = Rs. 800000

Rate of return = 15%

Average profit = Rs. 1200000

Normal value of business = (Average profit/ Rate of return) * 100

Normal value of business = Rs. (1200000/15) * 100

Normal value of business = Rs. 8000000

Goodwill = Normal value of business - capital employed

Goodwill = Rs. (8000000 - 800000)

Goodwill = Rs. 7200000

Answer 2

Given,

Average profit = ₹24,000

Capital employed = ₹1,20,000

Net rate of return = 10%

To find,

Goodwill

Solution,

We may use the steps below to solve this numerical problem.

We know that,

Normal value of business = (Average profit/ Rate of return) * 100

Thus,

The normal value of business = ₹ ( $\frac{24000}{10}*100$ )

                                                  = ₹2,40,000

Now,

Goodwill = Normal value of the business - Capital employed

               = ₹(2,40,000 - 1,20,000)

               = ₹ 1,20,000

Thus, the goodwill is ₹1,20,000. (Option a)